Natural resources management, particularly in the extractives industry, can make a meaningful contribution to a country’s economic growth when it leads to linkages to the broader economy. To maximize the economic benefits of extractives, the sector needs to broaden its use of non-mining goods and services and policymakers need to ensure that the sectors infrastructure needs are closely aligned with those of the country’s development plans.
In Africa, especially, mining and other companies that handle natural resources traditionally provide their own power, railways, roads, and services to run their operations. This “enclave” approach to infrastructure development is not always aligned with national infrastructure development plans.
On the northern tip of Lake Kivu, where eastern Democratic Republic of Congo (DRC) meets Rwanda, the pedestrian border crossing connecting the lush town of Gisenyi, Rwanda and the frenetic city of Goma in the DRC is called ‘’Petite Barrière’’. The name is misleading: the ‘’barrière’’ is in fact large and crowded, and features one of the highest daily flows of traders in Africa; between 20,000 and 30,000 traders cross it every day. For them, as for many others in the region, cross-border trade is a critical source of income.
Labor-intensive, light manufacturing industries led the economic transformation of some of the most successful developing countries in the world, including China and Vietnam. In Sub-Saharan Africa, that was simply not the case. The region’s share of the global light manufacturing market has declined to less than one percent since China’s emergence in the 1980s. Nevertheless, a review of recent trends in exports suggests that some East African countries –Ethiopia, Kenya, Tanzania, Uganda and Zambia – are making headway in light manufacturing industries.
According to the World Bank Group’s 2011 report, “Light Manufacturing in Africa,” the global trading environment “favors Sub-Saharan Africa if it can overcome key constraints in the most promising subsectors.” Those subsectors include the manufacture of food products and beverages; apparel and the dressing and dyeing of fur; wood and wood products; luggage and the tanning and dressing of leather; and fabricated metal products. Sub-Saharan Africa enjoys low labor costs and abundant resources, as well as preferential trade access to US and EU markets for light manufactures. Despite these advantages, the competitiveness of Africa’s light manufacturing industry continues to be undermined by the costs of importing and exporting intermediate inputs of both goods and services.
Digital entrepreneurs have the potential to connect to global markets like never before. Whether selling physical goods on internet platforms, or providing digital goods and services that can be downloaded and streamed, an entirely new ecosystem of innovative micro and small businesses has emerged in the developing world.
The World Bank Group hosted some of the pioneers in this space for a full-day conference on Harnessing Digital Trade for Competitiveness and Development on May 19. Here, we heard entrepreneurial success stories—an online platform for jewelry in Kenya, a provider of software solutions in Nepal, an online platform for livestock trade in Serbia—and dove into the constraints and challenges of running a digital business in an emerging economy.
The scope of these challenges made these success stories, and the broader potential they represent, even more inspiring. From internet connectivity to logistics, from financial payments to trade regulations, from bankruptcy laws to entrepreneurial and consumer digital literacy-- clearly, more needs to be done to fully harness the potential of digital trade for competitiveness and development and to foster an enabling environment to digital trade.
In the late 1950s, a group of businessmen and politicians on the outskirts of a small town in western Ireland realized their local airport was in jeopardy of losing its international flights. Knowing how important transit passengers and the airlines were to their economy, a proposal for a special industrial area near the airport was submitted and approved, marking the inception of the world’s first modern free trade zone in Shannon, Ireland. Today, the concept has gone global with an estimated 4,300 various types of zones worldwide.
All across the world, we have seen countries exploring and seizing the potential of these industrial zones—often also called industrial parks or special economic zones. In East Asia, you can point to the experiences of China, Singapore, Malaysia, the Republic of Korea and Vietnam. In Central America, we have those of the Dominican Republic, Costa Rica, and Honduras. In the Middle East and North Africa, the United Arab Emirates and Jordan have also created zones. In Sub-Sahara Africa, Mauritius first set up an export processing zone all the way back in the 1970s, and today, countries across the region continue to experiment with modern industrial zone regimes.
The concept of the industrial zone is gaining more acceptance globally. The appeal lies in these zones’ ability to catalyze economic development and structural transformation.
When we think of eradicating extreme poverty, most of us associate this idea with the provision of basic needs. Food. Water. Shelter. Some argue to include clean air, security, even access to basic healthcare and primary education. But what about access to the internet? Where does the internet fit into development?
This is one of the overarching questions put to the authors of the upcoming 2016 World Development Report: Internet for Development. It was also the topic of a recent roundtable discussion entitled Digital Trade: Benefits and Impediments here at the World Bank Group, where economists and development professionals, including representatives from the public and private sectors, sat down to discuss some of these issues in detail.
The conversation hinged on what the internet meant for trade, especially for online entrepreneurs in developing countries. The internet, in many ways, signifies innovation. How then can we ensure that individuals seeking to introduce their ideas to the world and tap into the global marketplace can best do so? Is this a question of infrastructure? Is it a question of regulation?
Here’s what the numbers tell us.
As world trade and investment have increasingly become organized around “value chains” – production lines that cross borders – Africa has struggled to reap the benefits of this trend, even as Asian and Latin American countries churned out cars, microchips, and textiles for consumers across the globe.
Some modern developments suggest that this could be changing – as global production networks have become more sophisticated, encompassing a wider variety of products and processes, they could provide new opportunities for African economies. But critical to success in this new environment are a good business climate, political will, and ease of trade on the continent.
We are issuing a call to action: On Thursday, as part of the World Bank-IMF Spring Meetings, the World Bank Group and Africa investor will host a panel discussion with African entrepreneurs, government officials, and other experts that you can watch online here: “Building African Participation in Global Value Chains.” The discussion will focus on how the different stakeholders – including businesses, banks, and governments – can work together to build African brands capable of creating jobs and increasing the continent’s role and influence on the global economic stage.
In Ethiopia, registering a trade name-- a precondition for a business startup-- had long been one of the most cumbersome procedures of starting a new business. One had to make frequent visits to the Ministry of Trade with a number of potential trade names, which in most cases were routinely rejected for no clear reason. In one documented instance, an applicant had to submit eighty different names before he was issued a legally registered trade name. The inordinate amount of time that one would spend in the process had created a huge public outcry.
Thankfully, things have changed. The Ministry of Trade, with support from the World Bank Group’s Investment Climate Program, has issued a new, simplified, and modern Trade Name Registration Law.
West African countries have been working for many years to develop and implement harmonized trade rules for crop inputs. While much remains to be done, new regional regulations for seed and fertilizer are already helping to guide quality improvements in some countries. The West Africa Seed Committee is due to be launched next week in Abidjan thereby clearing the way for establishment of a regional variety catalog and seed certification system. Work to operationalize the regional rules for fertilizer also continues.
Despite these positive developments, most West African countries are a long way from having the required capacities and institutional structures needed to implement their own trade rules. The agreed regulations are modeled on advanced international standards, yet most national regulatory systems for crop inputs are greatly overstretched if they exist at all. As a result, it will likely be many more years before true harmonized regional trade can begin.
A new World Bank Group Africa Trade Working Paper looks at these challenges and shows that simple solutions including unilateral and joint action by small groups of countries should not be ruled out as a way to fast-track progress and support long-term harmonization.